The amendments to the law “On
Foreign Investments in Commercial Entities of Strategic Importance for National
Defense and Security” (Federal Law No.57) will abolish preliminary approvals of
transactions involving the use of subsoil assets if the state owns a
controlling stake in the relevant business, and the size of the stake remains
unchanged as a result of the transactions.

No approval will be
required if the investor already owns at least 75 percent in the company. Also, the
law will not apply to transactions with companies under the control of regional
administrations across Russia.

The legal changes, signed
April 4, are expected to help investors address the problem of the validity of
previous decisions on the preliminary approval of transactions. There have been
cases when the Federal Anti-Monopoly Service approved a sale, but investors
didn’t have time to finalize the deal, forcing investors to file a completely new
application. If the amendments are approved, the applicants will only have to
inform the anti-monopoly service, not apply again.

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The amendments also specify
the list of activities considered strategic. According to Armen Khanyan,
director of the anti-monopoly service’s Department for Control over Foreign
Investments, the amended law will not apply to enterprises that use
biotechnological products to manufacture cheese, beer and baked goods (for
instance, yeast and some types of mold fungi). These biotechnological products
are qualified by legislators as “infectious agents.”

This will be the second
series of amendments to the law. Previous amendments were introduced in
December 2011 to reduce the list of strategic activities.

“We hope that legislators
will continue their work to improve Russian regulations and reduce
administrative barriers in those sectors where they are clearly excessive,” says
Sergei Stefanishin, a legal adviser for Ernst & Young in Moscow.